Explainer-Trump tariffs on chips and drugs would | Finance news

(Reuters) – U.S. President Donald Trump plans to impose tariffs on imported pc chips, prescribed drugs and metal, he stated on Monday, to push firms to fabricate more in the USA.

The feedback mark the latest in a quantity of trade-related threats unleashed by Trump in current days. He has already promised to slap 25% tariffs on imports from Canada and Mexico by Feb. 1 if the 2 nations do not meet calls for on border security and different points.

By specializing in chips and prescribed drugs, Trump might squeeze U.S. allies in Asia, together with Taiwan, South Korea and Japan.

WHAT’S BEING TARGETED FOR CHIPS?

Trump stated he plans to impose tariffs on imported pc chips with out offering particulars.

Asia is the world’s largest chip manufacturing hub, producing more than 80% of semiconductors bought globally, in accordance with the Asian Growth Financial institution.

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, makes semiconductors for Nvidia, Apple and different U.S. purchasers. TSMC generated 70% of its income in 2024 from clients based mostly in North America.

Whereas it’s building a $65 billion manufacturing facility in Arizona, the majority of TSMC’s manufacturing stays in Taiwan, with exports to the U.S. theoretically subject to tariffs.

WHAT ABOUT OTHER CHIPS?

Asian producers additionally dominate the market for reminiscence chips, with DRAM and NAND flash chips utilized in digital gadgets together with computer systems.

South Korea’s Samsung Electronics and SK Hynix collectively control round three quarters of the worldwide DRAM market.

The 2 firms, plus Japan’s Kioxia, which is managed by U.S. buyout firm Bain Capital, command a comparable market share in NAND flash.

Samsung is investing roughly $44 billion in chipmaking services in Texas with subsidies from the U.S. authorities.

WHAT ABOUT THE ECONOMIC HIT?

Chips are a main source of export income for South Korea and Taiwan, which means there’s a lot more at stake than simply the impression on producers themselves.

South Korea’s exports of semiconductors hit a file $141.9 billion in 2024, of which $10.28 billion was to the U.S., in accordance with knowledge launched by the Ministry of Commerce, Trade and Power earlier this month.

WHAT ABOUT OTHER CHIP SUPPLY CHAIN COMPANIES?

Japan is a main provider of chipmaking gear and supplies, all of which, at the least for now, seem to have averted direct point out by Trump. Main gear firms embody Tokyo Electron and Advantest.

WHAT ABOUT PHARMA?

Imposing tariffs on imported prescribed drugs might weigh on Japan, home of main drugmakers similar to Takeda, Astellas, Daiichi Sankyo and Eisai, which has been anticipating robust gross sales growth within the U.S. of its Alzheimer’s illness drug Leqembi.

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